2. LITERATURE REVIEW. 2.1 The prior research in PPPs

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1 INTERNATIONAL CONFERENCE ON MULTI-NATIONAL CONSTRUCTION PROJECTS Securing high Performance through Cultural awareness and Dispute Avoidance SHANGHAI, CHINA November 21-23, 2008 Managing the Performance of Public Private Partnership Projects to Achieve Value for Money: Key Performance Indicators Selection Jingfeng Yuan 1, Miroslaw J. Skibniewski 2, and Qiming Li 3 1. PhD Candidate, Southeast University, Nanjing, China, ; Visiting Research Scholar, University of Maryland, College Park, USA, Professor, University of Maryland, College Park, USA, Professor, Southeast University, Nanjing, China, ABSTRACT Public Private Partnerships (PPPs) have been applied in global construction market. During the lifecycle of the projects, many variables affect the performance of PPPs. However, some problems are related with multiple variables in practice. The application of PPPs has its own characteristics (e.g. stakeholders management, government regulations, transfer management, and complicated procurement system). These characteristics present a different practice in PPPs from that in traditional construction activities. Previous researches mainly focus on the planning, success measurement, and risk management, which ignore the process variables that can strongly influence the performance of PPPs. This paper puts the insights into the performance management to manage the process of PPPs aiming to improve the outputs of PPPs. Furthermore, paper investigates the characteristics of PPPs and identifies the Key Performance Indicators (KPIs) in assessing projects performance to achieve Value for Money. The KPIs are useful tools for project performance management and performance measurement in identifying the strength and weakness, thus appropriate decision can be adopted for improving efficiency, effective and economy, which will benefit both of public and private sectors. Keywords: Public Private Partnerships (PPPs); Key Performance Indicators (KPIs); Performance management; Performance measurement 1

2 1. INTRODUCTION A wide spectrum of options is available for the delivery of public infrastructure and services, ranging from direct provision by the government to outright privatization, with increasing responsibilities, risks, commitment, and rewards transferred from the government to the private sector (NCPPP, 2002). For example, supply and service contracts usually have a short duration. In such contracts, the private contractor performs specified tasks (e.g., material/ equipment supplies, works construction and facilities maintenance) whereas it is not directly responsible for providing related services. In a lease-and-operate contract, the private contractor operates and maintains the facilities at its own risk against the payment of a lease fee. In a build-operate-transfer (BOT) project, the private contractor is also responsible for building and financing the project and it has to transfer project facilities in operational conditions and free of costs to the government at the end of the concession term. In divestiture, the ownership of existing assets and the responsibility for future expansion and upkeep are transferred to the private contractor, in addition to financing and carrying out the investments required to meet the obligations specified in the contract and/or a general regulatory framework (Zhang, 2006b). Public/private partnerships (PPPs) are characterized by the degree to which the public and private sectors share the risks, obligations, and benefits of a project. The mix of public and private responsibilities and the risk allocation scheme used vary from project to project, and the structure of the partnership depends on the particular mix of responsibilities. The mix of financing instruments between the public and private sectors can be very diverse, as shown by the experience of certain European countries where private and public sector capitals coexist in varying proportions, according to the rules of private enterprise. The government involved may be federal, state, or local, while the specific agencies involved are often departments of transportation, energy, water, education or other independent authorities. The private parties may include firms specializing in public/private infrastructure, construction companies, equipment manufacturers, operations specialists, real estate developers, and various advisors. However, numerous studies to date demonstrated that problems of PPPs are caused by the interaction of multiple factors during the life cycle of the projects, including cost, quality, schedule, management ability and so forth, rather than a single factor (CEPAL, 2005; Koppenjan, 2005; Li et al., 2005b; Zhang, 2005b; Askar and Gab-Allah, 2002). As concluded by Sanghi et al. (2007), the problems of PPP projects related to the public sector contains poor procurement incentives, lack of coordination, lack of skills in PPPs, high transaction cost, and lack of information etc. Therefore, how to construct a better implementation framework and how to make PPPs more efficient are interesting and attractive, which is not only limited in the stage of preconstruction, planning, or operation, but also expanded to the integration of whole process to manage multiple factors that can affect the PPP projects to improve the outputs. As mentioned above, PPPs are long-term contractual relationships with numerous factors that can affect the projects. Numerous cases have shown that a successful PPP project should 2

3 integrate multiple factors deputed in this figure. Problems reported with PPPs include a high costs in tendering, complex negotiations, cost restraints on innovation, and differing or conflicting objectives among the project stakeholders (Akintoye et al., 2003). It is therefore important to explore a series of KPIs. The role of performance objectives in performance management is the baseline for performance measurement that is the process of determining how successful organizations or individuals have been in attaining the objectives. Therefore, the objective of this research is to find the stakeholders best-value performance indicators by case studies and literature reviews, and establish criteria system to evaluate the process of the PPP projects. 2. LITERATURE REVIEW 2.1 The prior research in PPPs PPPs are contractual relationships between the public and private sectors in infrastructure development. The Canadian Council for Public Private Partnerships (2004) defines PPP as a cooperative venture between the public and private sectors, built on the expertise of each partner that best meets clearly defined public needs through the appropriate allocation of resources, risks and rewards. PPPs have been practiced worldwide in both developed and developing countries with multiple objectives including promoting infrastructure development, reducing costs, increasing construction and operation efficiencies, and improving service quality by incorporating the private sectors knowledge, expertise, and capital. In this research field, a series of problems have attracted researchers interests. To date, much of the extant literature has been restricted to examining one of the following four aspects of PPPs: Providing an explanation for the rise in their popularity with government and some problem conclusions (Zhang, 2005a; Koppenjan, 2005; Spackman, 2002; Thuen and LÆRUM, 2005; Askar and Gab-Allah, 2002; Badshah, 1998; Mustafa, 1999). Discussing the outcomes of PPP projects based on the case studies (Tiong, 1990; Boase, 2000; Abdul-Aziz, 2001; Bloomfield, 2006; Lim, 2007). Suggestions on how to make decisions to implement a PPP project mainly including tender selection and future risks analysis (Akintoye, et al., 2003; Alonso-Conde et al., 2006; Kumaraswamy and Morris, 2002; Kumaraswamy and Anvuur, 2008; Lo et al., 1997; Tiong and McCarthy, 1992; Tiong 1994a; Tiong 1994b; Wang, 1999; Zhang et al., 2002; Zhang, 2005b) Examining the criteria that make for a successful PPP project (Li et al., 2005b; NAO, 2001; Qiao et al., 2001; Tiong et al., 1992). Unfortunately, little in these literatures provides insight into the management of this form of inter-organizational relationship, process control. In general, the existing literatures are concerned with examining PPPs at only the broad social or organizational level, thus providing few insights into the ongoing managerial life of a PPP. This deficiency in the literature, then, 3

4 represents a significant gap in the current understanding of PPPs. Noble and Jones (2006) concluded that lack of micro-management analysis and lack of stage-specific analysis are two critical problems in the research. Notwithstanding a few researchers have moved their insights into the process of the PPP projects (Noble and Jones, 2006; Chan et al., 2005; Carllio et al., 2006), the prior research mainly focuses on a single factor of the process, which in the outcomes of their analysis may lead to neglect the influence of other factors. Therefore, it is necessary to establish an integrated system to control and measure the whole process of a PPP project to help PPPs to achieve its intended objectives. In other words, all factors must be considered if they may affect the process, implementation and success of a PPP project. 2.2 Related research in performance management and measurement in construction Throughout the last several decades, a number of industries, primarily manufacturing, have introduced new methods and techniques to shift traditional paradigms in order to improve their performance. This has led to the creation of new philosophies, e.g. concurrent engineering/construction, lean production/construction, just in time (JIT), total quality management (TQM), etc. The main driver behind those philosophies is the optimization of an organization s performance both internally and externally within its respective marketplace, which has been inevitably introduced to construction industry. Kagioglou et al. (2001) presented a framework which ensured that effective strategies were deployed to form the performance management system that construction organizations can adopt. Bititci et al. (1997) explained the distinction between performance management and measurement. The performance system can be seen as a closed loop control system which deploys policy and strategy, and obtain feedback from various levels in order to manage the performance of the construction projects. Based on the admiring achievement in the field of performance management and measurement in manufacturing industry and primary success in construction industry, performance management and measurement can be viewed as an effective tool to help PPPs, which are long-term with high risk and a series of influence factors. It aims to establish an integrated system to track key indictors during the life-cycle process, measure them to feedback, and continually improving performance. 3. RESEARCH METHODOLOGY KPIs are compilations of data measures used to assess the performance of a PPP project operation. They are the methods management uses to evaluate the performance of a particular project. These evaluations typically compare the actual and estimated performance in terms of effectiveness, efficiency, and quality in terms of both workmanship and product. Generalized models exist for implementing and monitoring traditional construction activities, but they fail to identify which indicators will accurately portray the changes in performance. Instead of reporting and disseminating every piece of information gathered on the job, a more simplified 4

5 method should be used to gather only that data which directly predicts performance for the task to be measured. Furthermore, a specific model aiming to report and monitor the performance of PPP projects is needed to be established. In order to measure performance or calculate the effects of any given change on the process a PPP project, one must first determine the appropriate KPIs to focus on to measure its impact. Accurate analysis of construction performance can be attained only after the key indicators are determined and monitored. Using a process viewpoint, this paper extensively investigates the factors that can influence the project performance during the process/lifecycle of the PPP projects. In order to identify these key indicators, there are two main research phases: the establishment of conceptual model of performance indicator system, and the identification of KPIs of PPP projects. Each phase provides progressive focus for the next. First, the establishment of conceptual model phase is carried out to develop an indicator system to measure the PPP projects performance according to the findings of literature review. The conceptual model is conducted on the basis of stakeholders requirements by integrating the factors that would influence the performance of the projects aiming to improve the efficiency and effectiveness of PPPs, which provide a narrative of performance management in PPPs. Finally, the KPIs in PPP projects are identified under the guiding of conceptual model as well as comprehensive literature review related to the PPP application. 4. THE METRICS OF SELECTING KPIS IN PPP PROJECTS During the lifecycle of the PPP projects, the performance of PPP projects will change which can be influenced by several factors. Some of these factors are static which would be traditionally fixed at the beginning of the projects in the given social economic environment for special projects. The studies on PPPs also indicate that these factors would influence the future performance of the projects, e.g. design, construction and operation. The other factors are dynamic during the period of projects, which will be affected by external environment or internal operational factors so that will furthermore influence the performance, e.g. financing ability, public satisfactions and management ability of SPV. On the other hand, PPPs can supply higher level public service than traditional construction activities, which has been proved by some researches and practical cases. PPPs always stress on Value for Money (VfM) and innovation on the basis of concordant partnership. Therefore, the factors can influence the performance of PPP projects would be more complicated than traditional construction activities, which should consider the integration of static and dynamic factors and the benefits of different stakeholders to achieve VfM. Meanwhile, the performance indicators can be described as a potential effectiveness attribute of a system. It is how good a system is, in objectively measurable term. It should satisfy following needs. are valued by defined stakeholders; are always capable of being specified quantitatively; can be complex notion, consisting of many elementary performance attributes. 5

6 5. THE VIEW OF KPIS SYSTEM IN PPP PROJECTS 5.1 Establishing the KPIs System in PPPs As shown in Fig.1, This performance indicator system is divided into three parts. The first is the original characteristics and features of the PPP projects which will affect the performance of the projects at the beginning stage. These indicators will usually not change during the whole life cycle of the PPP projects, but they will strongly influence the concessionaire selection, the agreement between the private and public sectors, risk allocation and to what extent the project will achieve success under the influence of economic, legal, political environment in a particular host country of the projects. The second is composed of financial and marketing indicators, innovation and learning indicators, and stakeholders indicators. This part reflect special projects characteristic from the perspective of economic, innovation, culture, and the benefit of the stakeholders. The third part indicates the factors may affect the process of construction, operation, maintenance, transfer and post-transfer. In the second and third part, all indicators should be dynamic and measurable to reflect the efficiency, customer satisfaction, business success, product requirement, and future potential of the projects. Any performance change can also be measured by these indicators. 6

7 Key Performance Indicators system in PPPs The physical characteristics of projects (KPI1) KPI 1-1Type of building KPI 1-2Level of design complexity KPI 1-3Level of construction complexity KPI 1-4Level of technologically advancement KPI 1-5Concessionaire s knowledge of PPP KPI 1-6Government s knowledge of PPP KPI 1-7Competitive tender procedure KPI 1-8Standard PPP contract with enough flexibility KPI 1-9General public/social support KPI 1-10 Stable and favorable macroeconomic Condition KPI 1-11 Stable and favorable legal environment KPI 1-12 Stable and favorable political environment KPI 1-13 Commitment and responsibility between public and private sectors KPI 1-14 Project technical feasibility, constructability, and maintainability KPI 1-15 Appropriate risk allocation, risk sharing and risk transfer Part 1 Financing and marketing indicators (KPI2) KPI2-1 Sound financial analysis KPI2-2 Sustainable profitability KPI2-3 Increased marketability KPI2-4 Financial ability of whole shareholders KPI2-5 Financing cost KPI2-6 Perfect tariff/tolls or price adjustment mechanism for the project KPI2-7 Realistic schedule of investment and revenue KPI2-8 Insurance cover KPI2-9 Construction and concession period Innovation and learning indicators (KPI3) KPI3-1 Investment in research and development of new technology KPI3-2 Establishment of learning organization KPI3-3 Employee Training KPI3-4 Technology innovation (e.g. designing, construction, planning, etc.) KPI3-5 Technology transfer KPI3-6 Financial innovation (e.g. creative financial package) Stakeholders indicators (KPI 4 ) KPI 4-1 Public client s satisfaction KPI 4-2 General public/social satisfaction KPI 4-3 Good relationship among the concessionaire, subcontractors, and suppliers KPI 4-4 Good relationship in project team Part 2 Interrelationship between the indicators Process indicators (KPI5) KPI 5-1High quality control KPI 5-2Safety management KPI 5-3Health control KPI 5-4Environment protection KPI 5-5Effective risk management system KPI 5-6Facility management KPI 5-7Stress/conflicts management KPI 5-8Resource utilization (material and equipment) KPI 5-9Contract management KPI 5-10 Prominent technical management and skill KPI 5-11 Interface management between organizations and stages KPI 5-12 Time management KPI 5-13 Cost management KPI 5-14 Good governance Part 3 Figure 1. The framework of KPIs in PPPs 5.2 Remarking the KPIs in PPPs The physical characteristics of projects (KPI 1 ) In spite of wide application of PPPs in numerous fields, Bloomfield (2006) points out that local governments embarking on long-term PPP contracts must invest in specialized field with effective contract management and strong governance structures. The type of construction should be considered carefully. Furthermore, design, construction plan, and technical scheme become especially complex since PPPs have been applied to complete large scale and complicated infrastructure projects (Askar and Gab-Allah, 2002). Therefore, the issues related to these factors should be paid attention to. In some cases, both the public and private sectors may not be ready for the PPP project if it is adopted just because of the urgent need of more infrastructure facilities. For the public sector, it may be an inexperienced body lacking proper understanding of PPPs. Government may 7

8 have unreasonable expectations of the private sector. On the other side, the private sector may lack people prepared for working on the PPP projects, understanding among the stakeholders, managerial expertise, experienced project management team, good coordination and team work with concessionaire consortium, the ability to deliver quality service for price offered, and the ability to identify and manage risks (Zhang, 2005a; Li, 2005b;). Compare to traditional construction activities, procurement in PPPs is more complicated. Efficient procurement will select the proper private sector that can undertake the project as the party best able to get contract, which has been viewed as an important factor for a successful PPP project by several researches and some case studies (Wang et al., 2000; Zhang and Kumaraswamy, 2001; Zhang et al., 2002; Li, 2005a; Kumaraswamy and Anvuur, 2008). Then, a long-term contract will be signed between the public and private sectors. Based on some case studies, lack of standardized agreement may result in slower and more expensive procurement process than non-ppp procurement so that overtime and cost overrun of the whole life-cycle will happen (CEPAL, 2005; Akintoye et al., 2003). Therefore, making procurement process more efficient can benefit the performance of the PPP projects greatly. The promoter of a PPP project should make an adequate and sustained marketing campaign so that the citizens or general public can understand the long-term implications and benefits of the project. This kind of support is very important for procurement process, achieving success and gaining viability in the PPP projects (Salman, 2007). On the other hand, economic, legal and political environment can influence the performance of PPP projects, which have very close relationship with local community of the PPP projects. When success factors, risk factors and viability factors are considered, economic, legal and political factors are also important (Li et al, 2005a; Zhang, 2006a; Salman, 2007). Furthermore, the commitment and responsibility of both the public and private sectors are viewed as a significant successful factor in PPP projects (Li et al, 2005a; Akintoye et al., 2003). All parties should commit their best resources (financial, human, etc.) to the partnership project to achieve value for money and maintain the projects in high performance. Technical feasibility is the key that can provide an imaginative technical solution for the PPP projects (Zhang, 2006b). Improving constructability of PPP projects is the responsibility of all project stakeholders: public sector, private sector, designers, and subcontractors. On the basis of technical feasibility and constructability, maintainability is a necessary considered factor in the operation stage of PPP projects which can improve internal value of facility and prolong facility s operation period that can provide a good condition for project transfer (Zhang, 2006a). It is obvious that risk is a crucial issue in the PPP projects, which has been studied broadly and has been proved by lots of cases. How to allocate risks, how to share them and how to transfer them should be considered very seriously. A good risk management mechanism should be established before the implementation of the PPP projects, which could greatly act on the performance (Li et al., 2005b; Alonso-Conde et al., 2007) Financing and marketing (KPI 2 ) 8

9 There is a wide range of risks and uncertainties related to a PPP project in the long concession period (Askar and Gab-Allah 2002). The occurrence of one or more of these risks can lead to serious financial consequences to the concessionaire, which may result in the failure of the projects. Furthermore, the project company of a PPP project is usually a SPV (distinct legal entity) using no recourse or limited-recourse financing, which requires appropriate financing techniques. Therefore, a strong financial capability is essential to the successful development of a PPP project (Zhang, 2005b). At the same time, improving marketability can greatly help concessionaire to deal with financial issues and obtain more revenue and profit, which can release the pressure of financial risks to make sure that SPV can focus on construction, operation and market development. Sound financial analysis refers to that important financial aspects should be analyzed adequately, which contains high equity/debt ratio and low tariff/toll or unit price, which means increased capability of concessionaire to overcome financial difficulties and higher commitment to project success (Zhang, 2005b). Based on the survey of Salman et al. (2007) about viability of the BOT projects, return of investment (ROI) is the fifth important factor in 21 factors. This is also an attractive factor to encourage the private sector to operate PPP projects more efficient and the public to take full responsibility to supervise the PPP projects because of sharing profits with private sector (Li et al., 2005b). On the basis of profitability, marketability shows concessionaire s ability to possess current market and develop future market (Zhang, 2005b). Financing cost refers to low financial service charge, fixed and low interest rate financing, long-term loan financing and low cost from fluctuations of currency and exchange rate, which would minimize financing and refinancing risks (Zhang, 2005b). Tariff/tolls or price adjustment mechanism should safeguard consumers' interests without undermining the project viability, while maintaining a certain incentive for the private sector to develop and operate projects efficiently (Ye and Tiong, 2003). Realistic schedule of investment and revenue refers to the schedule of all financial sources (including equity, debt and repayment) and their combination in the development of the project. Revenues distribution can affect the normal operation of the project; contingencies should be made for possible risks in different areas (Zhang, 2005b). One case of Highway project of Nova Scotia, Canada studied by Yeo and Tiong (2000) indicates that the debt repayment schedule structured by proactive management of risk enables project to match the projected revenues and to meet the local government's desired toll levels, which consequently reduce political risk and commercial risk. In order to reduce and transfer various types of risks, insurance coverage should be examined thoroughly. Short concession period means low total costs to the public client and high operation risk to the private. Short construction period and reasonable concession period are critical for the PPP projects viability (Salman et al., 2007) Innovation and learning (KPI 3 ) Innovation and learning can be considered as important factors to influence the performance of PPP projects. The PPP project is the long-term process with high risks, competition, and uncertainty, which needs both the private and public sectors to learn advanced knowledge, 9

10 experience, and all of relative useful information. Enough investment on the research, excellent learning organization and perfect training mechanism can help to continually increase the capacity to improve performance by gaining new knowledge. Innovation on the other hand is the way of applying new knowledge/technique in strategic planning, process design, creative financial package, and resource allocation and management in order to improve performance and sustain competitive advantage. The initiative drive comes from related risks and high requirement from the public sectors force SPV to adopt new technology and management methods and to apply patents in order to reduce cost, shorten time and release risks (Shen et al., 2004). In other words, PPPs present further concepts of BOT and PFI, which needs long-term cooperation between the public and private sectors, steady-going financial support and complicated technology. Considering all of factors above, PPP projects can afford a platform for Technology Transfer. Knowledge or technology transfer could also be an effective mechanism for mitigating risks, a key issue in an increasingly complex PPP environment (Carrillo, 2006) Stakeholders (KPI 4 ) Stakeholder opposition has been reported as the main reason for project failures of PPP projects in several instances. As such, capturing and addressing of stakeholder inputs is crucial to the success of the PPP projects (El-Gohary et al., 2006). Therefore, the 4 indicators in Fig.5 are selected as indicators to present the performance of PPP projects. The problems of public sector including budget, time and restraint beset many municipal and other public authorities, especially in terms of improving public infrastructure and delivering essential services. Clearly, the attractiveness of PPPs in addressing this problem is fully recognized by stakeholders, which drive the private sector to satisfy public client to improve social welfare (e.g. price, environment, convenience, opportunity for job etc.) to make society happy (Li et al., 2005b). General contractors are continuously involved in a process of transforming inputs (i.e. materials, labor, and capital) into outputs (e.g. constructed facility), during which the private sectors are accompanied by a number of other firms such as subcontractors, material vendors, and equipment dealers. Kale and Arditi (2001) reveal that maintaining a relationship of high quality with subcontractors is positively and strongly associated with the perceived performance. In the PPP context, this relationship is extremely more important than in traditional construction methods (Kumaraswamy and Anvuur, 2008). Therefore, a growing body of research supports the view that contractual parties are more willing to cooperate and to build good relationships on longer-term contracts in PPPs. On the other hand, good relationship in project team (SPV) is mainly used to evaluate team management, interior organization structure, and organizational culture, which is expressed by team value and team attitude (Kumaraswamy and Anvuur, 2008) Process (KPI 5 ) In order to deliver value to stakeholders and the project, SPV must be sure they have right process and capabilities in place. The measurement allows to trace which processes and capabilities must be competitively and distinctive, and which merely need to be improved or 10

11 maintained. The process indicators can help track if the process is delivering values they were intended for, which will help the owner to track the capabilities of processes (weakness and strengths) in affording value to stakeholders. Thus the 14 indicators can be considered as process indicators. In this package some indicators are from traditional performance management in construction. However, their duration period include construction and operation. These indicators include high quality control, safety management, health control, environment protection, resource utilization (material and equipment), contract management, prominent technical management and skill, time management, and cost management. Further explanation in detail of these indicators can be found in the research of Shen et al. (2004), Kagioglou et al (2001), and Zhang (2006b). And other indicators are selected because of their unique characteristic in PPPs including effective risk management system, facility management, stress/conflicts management, interface management between organizations and stages, and good governance. Risk management involves using skill and experience of various risk management methods. In operational stage of the PPP projects, various facilities management actions should be taken periodically. In the report of CEPAL (2005), facility management is a weakness in the process of the PPP project. It includes the ability to allocate the limited resources for short-term and long-term work programs; the ability to optimize the distribution of the limited periodical budgets in the facility; the ability to predict the level of performance of the facility (Zhang, 2006c). PPPs reverse the over fragmentation of functions in a traditional design-bid-build (DBB) contract that often leads to divergent if not confrontational agendas of the multiple participants, providing a great potential of reduced dispute and claims. Hence effective stress/conflict management can supply a good work environment to improve outcome of performance. Interface management (IM) is the management of communication, coordination, and responsibility across a common boundary between two organizations, phases, or physical entities which are interdependent. Organizational interfaces, lifecycle interfaces, and physical interfaces are believed are important to BOT project management by Chan et al. (2005). Badshah (1998) emphasizes that good governance is essential to attract private sector participation in public services delivery. In UK PFI projects, most authorities and contractors consider that governance arrangements are working well to delivery high quality (NAO, 2001). Therefore, Li et al. (2005b) concludes that good governance is a significant success factor in the PPP projects, which can affect the performance of the PPP projects. 6. Conclusions In response to urgent need and modern development, some attempt has been made by both of the public and private to promote PPPs from the traditional concept of construction. Many researches have put insights into this field from four directions. First, it is provided an explanation for the rise in their popularity with government and some problem conclusions. Second, the outcomes of PPP projects based on the case studies are discussed. Third, the suggestions on how to make a decision to implement a PPP project are given. The last, the 11

12 criteria that make for a successful PPP project are examined. There may be disappointment in some quarters that the researches on PPPs have not gone all the way to provide the appropriate and perfect method to manage the performance of PPP projects to achieve VfM. Performance management has been introduced into construction industry for many years, which has been proved a effective method to improve the outcomes of the projects. In this paper, a KPIs system is selected based on the characteristic of PPPs and the concept of VfM in order to establish a base for further research on the performance management on PPPs. On the other hand, the KPIs of PPPs can be used as the criterion for performance evaluation. Thus the indicators are very important for ensuring both of public and private sectors to make appropriate decisions during the lifecycle of the PPP projects in order to promote the value of PPPs. This study has found that a sophisticated set of indicators that can be applied in the system of performance management. This sophistication is suggested due to the implementation of complicated macro and micro conditions during the lifecycle of projects. Proper understanding of these performance indicators has the same significance to both public and private sectors as a long-term partnership should be established. The KPIs used in performance management are identified from five attributes: the original characteristics of projects, financing and marketing, innovation and learning, stakeholders and process. Although the KPIs are selected in this paper, it is only a step towards an understanding of the performance management in PPP projects. However, there are extensive works should be accomplished. The next step after selecting the KPIs is that they will be included in a questionnaire survey instrument that also addressed wider issues involved in the PPP projects. The foundations layed out in this paper are the base for future research in this regard. REFERENCES Abdul-Aziz, A. (2001) Unraveling of BOT Scheme: Malaysia s INDAH Water Konsortium, Journal of Construction Engineering and Management, 127(6), Akintoye, A., Hardcastle, C., Beck, M., Chinyio, E., and Darinka Asenova, D. (2003) Achieving best value in private finance initiative project procurement, Construction Management and Economics, 21, Alonso-Conde, A. B., Brown, C., and Rojo-Suarez, J. (2007) Public private partnerships: Incentives, risk transfer and real options, Review of Financial Economics, doi: /j.rfe Askar, M. M., and Gab-Allah, A. A. (2002) Problems Facing Parties Involved in Build, Operate, and Transport Projects in Egypt, Journal of Management in Engineering, 18(4),

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